The proposed project will pursue two major areas of research related to quality measurement and payment policy reform to improve value in healthcare. The first pertains to the evaluation and design of estimators of outcome quality and cost in order to profile the performance of healthcare providers. This research will evaluate the performance of existing estimators of outcome performance, propose new estimators, and validate the performance of these estimators to profile the quality, cost, and efficiency of hospitals and physician practices. The second area of research I will pursue is an evaluation of the Massachusetts Medicaid (MassHealth) hospital-based pay-for-performance (P4P) program. I will test the effect of the P4P program on quality and cost for the areas incentivized in the program (maternity and newborn care, community acquired pneumonia, surgical infection prevention, pediatric asthma). I will also estimate the effect of the program on racial and ethnic disparities. To evaluate the performance of outcome measures, a simulation model will be constructed and a series of Monte-Carlo simulation experiments will be designed and implemented. The basic approach is as follows: hypothetical providers are randomly assigned a true outcome score, a performance improvement trajectory, a patient risk score, a sample size, and a sample size trajectory. A random shock, inversely associated with sample size, is then created for each provider. Observed outcome scores, derived as a function of true outcome quality, patient risk, and the random shock are created for each hospital. Using only information on observed outcomes, true outcomes are then estimated using the candidate outcome estimators and the performance of these estimators is compared. The performance of these estimators will then be validated for hospitals and physicians using national Medicare data and data from Massachusetts. To evaluate the effect of the MassHealth program on quality, costs, and racial and ethnic disparities, I will draw on methods employed in my previous research. This will involve the use of panel data econometric techniques to test whether Massachusetts hospitals increased quality and decreased cost for MassHealth patients after the program was implemented. To examine the effect of the program on disparities, I will test for reductions in both within-hospital disparities in quality and between-hospital disparities in quality after the program was implemented. The skills and knowledge required to pursue my proposed research will be bolstered by an outstanding group of mentors and a robust education and career development plan. My mentors are leaders in the fields of payment and financing of healthcare, quality measurement, organizational research, health economics, and comparative effectiveness. Further, my mentors employ insights and perspectives from economics, political science, sociology, and clinical practice in their research, providing a rich and diverse intellectual environment from which I can draw upon as a mentee. In following my career development plan, I will enhance my methodological and programming skills, learn more about the responsible conduct of research, acquire knowledge of clinical practice and medical organization, and present my research findings and interact with colleagues at several national conferences. Research that successfully fulfills the aims of my K01 proposal will have important policy relevance. The proposed research will add to our knowledge about the use of outcome measures in pay-for-performance and public quality reporting while also providing further evidence about the effectiveness of pay-for- performance through the evaluation of the Massachusetts program. While ambitious, my track record of research achievement shows that I am capable of conducting research that achieves these aims. Further, the coursework and applied research conducted for the K01 will augment my research skills, enhancing my ability to achieve these aims. After collaborating with my mentors on this research, I will be have established myself as a researcher in the fields of P4P and quality measurement, positioning myself for R01 grants in these areas.